Organization Theory and Design

TENTH EDITION

Richard L. Daft
VANDERBILT UNIVERSITY

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SOUTH-WESTERN
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Part 1: Introduction to Organizations Chapter 1; Organizations and Organization Theory

Organization Theory in Action Topics, 6 Current Challenges, 7 * Purpose of This Chapter, 10 What is an Organization? Definition, 11 From Multinationals to Nonprofits, 11 Importance of Organizations, 12
SookMarfc 1>0: The Company: A Short History of a Revolutionary Idea

Organizational Configuration Mintzberg's Organizational Types, 26 Contemporary Design Ideas, 30 Efficient Performance versus the Learning Organization 10 From Vertical to Horizontal Structure, 31 From Routine Tasks to Empowered Roles, 31 * From Formal Control Systems to Shared Information, 33 From Competitive to Collaborative Strategy, 33 From Rigid to Adaptive Culture, 33 In Practice: Cementos Mexicanos Framework for the Book Levels of Analysis, 35 Plan of the Book, 37 Plan of Each Chapter, 37 Design Essentials 22 22 24
Chapter 1 Workbook: Measuring Dimensions of Organizations Case for Analysis: Perdue Farms Inc.: Responding to 21st Century Challenges

26

30

13 14

Dimensions of Organization Design Structural Dimensions, 15 * Contextual Dimensions, 17 In Practice: Ternary Software Inc. Performance and Effectiveness Outcomes, 20 In Practice: Federal Bureau of Investigation The Evolution of Organization Theory and Design Historical Perspectives, 23 How Do You Fit the Design? Evolution of Style Don't Forget the Environment, 26

34 35

18

39
40 41

Part 2: Organizational Purpose and Structural Design _ Chapter 2: Strategy, Organization | Design, and Effectiveness
<
CO

55
60 6i The Importance

Organizational Purpose

56

Strategic Intent, 60
In Practice: Walgreens

Purpose of This Chapter, 57 58

g The Role of Strategic Direction in Organization m Design

Operative Goals, 62 of Goals, 64

VIII

Contents
How Do You Fit the Design? The Pleasure/Pain of Working on a Team

A Framework for Selecting Strategy and Design Porter's Competitive Forces and Strategies, 65
How Do You Fit the Design? Your Strategy/ Performance Strength in Practice: Apple

65

100

Organization Design Alternatives Required Work Activities, 101 * Reporting Relationships, 102 Departmental Grouping Options, 102 Functional, Divisional, and Geographic Designs Functional Structure, 104 in Practice: Blue Bell Creameries, Inc. 71 Functional Structure with Horizontal Linkages, 105 Divisional Structure, 106 * Geographic Structure, 109 Matrix Structure 74 75 and Weaknesses, 112 In Practice: Englander Steel Horizontal Structure Characteristics, 116 In Practice: GE Salisbury Strengths and Weaknesses, 118 Virtual Networks and Outsourcing 81 81 84 85 How the Structure Works, 120 In Practice: TiVo Inc. Strengths and Weaknesses, 121 Hybrid Structure Applications of Structural Design Structural Alignment, 125 * Symptoms of Structural Deficiency, 125 Design Essentials 90 92 92 94 Chapter 3 Workbook: You and Organization Structure Case for Analysis: & Grocery Stores Inc. Case for Analysis: Aquarius Advertising Agency

101

66 68

104 105

Miles and Snow's Strategy Typology, 70

BookMark 2.0; The Strategy Paradox: Why Committing to Success Leads to Failure (And What to Do About It)

How Strategies Affect Organization Design, 72 Other Factors Affecting Organization Design, 73 Assessing Organizational Effectiveness Traditional Effectiveness Approaches Goal Indicators, 75 Resource-based Indicators, 76 Internal Process Indicators, 77 The Balanced Scorecard Approach to Effectiveness Design Essentials
Chapter 2 Workbook: Identifying Company Strategies and Effectiveness Criteria Case for Analysis: The University Art Museum Case for Analysis: Airstar Inc. Chapter 2 Workshop: The Balanced Scorecard and Organizational Effectiveness

110

113 115 117 119 120 122 123

77 79

Chapter 3: Fundamentals of Organization Structure

Purpose of This Chapter, 90 Organization Structure BookMark 3.0: The Future of Management Information-Sharing Perspective on Structure In Practice: Textron Inc. Vertical Information Sharing, 94 * Horizontal Information Sharing, 95

38

127 128 129 132

Part 3: Open System Design Elements

137
In Practice: Univision

Chapter 4: The External Environment

Purpose of This Chapter, 140 The Organization's Environment Task Environment, 140 General Environment, 142 * International Environment, 143

144 144

138
140

The Changing Environment Simple-Complex Dimension, 145 Stable-Unstable Dimension, 146

BookMark 4.0; Confronting Reality: Doing What Matters to Get Things Right

146

Framework, 147

Contents

ix

Adapting to a Changing Environment Adding Positions and Departments, 149 In Practice: Wal-Mart Building Relationships, 150 Differentiation and Integration, 152 Organic versus Mechanistic Management Processes, 153 * Planning, Forecasting, and Responsiveness, 155 How Do You Fit the Design? Mind and Environment Framework for Responses to Environmental Change Dependence on External Resources Influencing External Resources Establishing Formal Relationships, 159 In Practice: AT&T Influencing Key Sectors, 162 In Practice: eBay Organization-Environment Framework, 164 Design Essentials
Chapter 4 Workbook: Organizations You Rely On Case for Analysis: The Paradoxical Twins: Acme and Omega Electronics

149 149

In Practice: Axiom Global Inc.

190

Strategies for Survival, 191 Institutionalism The Institutional View and Organization Design, 193 * Institutional Similarity, 194 Design Essentials
Chapter 5 Workbook: Management Fads Case for Analysis: Oxford Plastics Company Case for Analysis: Hugh Rssel, Inc. Chapter 5 Workshop: Ugli Orange Case

192

197
199 199 200 203

155 156 158 158 160 163

Chapter 6: Designing Organizations for the International Environment

Purpose of This Chapter, 210 Entering the Global Arena Motivations for Global Expansion, 211
BeehMarh 6.0: The World Is Flat: A Brief History of the Twenty-First Century

208
210

Integrative 165
167 168

211

Stages of International Development, 214 Global Expansion through International Strategic Alliances, 215 Designing Structure to Fit Global Strategy Model for Global versus Local Opportunities, 216 * International Division, 219 Global Product Division Structure, 220 Global Geographic Division Structure, 221
In Practice: Colgate-Palmolive Company 222

216

Chapter 5: Interorganizational Relationships

Purpose of This Chapter, 176 Organizational Ecosystems Is Competition Dead?, 177
In Practice: Sony Corporation and Samsung Electronics Company

174
176

Global Matrix Structure, 223 In Practice: Asea Brown Boveri Ltd. (ABB)
177

224 225 228 233

Building Global Capabilities The Global Organizational Challenge, 226 In Practice: IBM

The Changing Role of Management, 179 Interorganizational Framework, 180 Resource Dependence Supply Chain Relationships, 181 Power Implications, 182 In Practice: Amazon.com Collaborative Networks
Why Collaboration?, 183 184 How Do You Fit the Design? Personal Networking

181

Global Coordination Mechanisms, 230 Cultural Differences in Coordination and Control National Value Systems, 233

183 183

How Do You Fit the Design? Are You Ready to Fill an International Role?

234

Three National Approaches to Coordination and Control, 235 The Transnational Model of Organization Design Essentials 237 240
242 242 243 246

From Adversaries to Partners, 185

5,0; Managing Strategic Relationships: The Key to Business Success 187

Population Ecology Organizational Form and Niche, 189 Process of Ecological Change, 189

188

Chapter 6 Workbook: Made in the U.S.A.? Case for Analysis: TopDog Software Case for Analysis: Rhodes Industries Chapter 6 Workshop: Comparing Cultures

Contents

Part 4: Internal Design Elements Chapter 7: Manufacturing and Service Technologies

Purpose of This Chapter, 255 Core Organization Manufacturing Technology Manufacturing Firms, 256 Strategy, Technology, and Performance, 258 In Practice: Printronix
BookMark 7.0; Inviting Disaster: Lessons from the Edge of Technology

251 252
256 Organizational Decision-Making Systems, 298 Feedback Control Model, 299 Management Control Systems, 300
How Do You Fit the Design? Is Goal-Setting Your Style? In Practice: eBay

259
260

The Level and Focus of Control Systems Organization Level: The Balanced
Scorecard, 305 BookMark 8.0; Five Key Principles of Corporate Performance Management

301 302 305

Contemporary Applications Flexible Manufacturing Systems, 261 Lean Manufacturing, 263

In Practice: Matsushita Electric Industrial Company

261

306

Department Level: Behavior versus Outcome Control, 308 In Practice: Best Buy
263

310 311

Performance and Structural Implications, 264 Core Organization Service Technology Service Firms, 267
How Do You Fit the Design? Manufacturing vs. Service 269 271

Adding Strategic Value: Strengthening Internal Coordination Intranets, 311 Web 2.0 Tools, 312 Knowledge Management, 312 In Practice: ExactTarget Inc. Enterprise Resource Planning, 314 Adding Strategic Value: Strengthening External Coordination The Integrated Enterprise, 315 In Practice: Corrugated Supplies Customer Relationships, 318 E-Business Organization Design In-House Division, 319 Spin-Off, 319 Strategic Partnership, 320 It Impact on Organization Design Design Essentials
Chapter 8 Workbook: Balanced Scorecard Exercise Case for Analysis: Century Medical Case for Analysis: Product X

266

314

Designing the Service Organization, 270

In Practice: Home Depot Inc.

315 316 319

Non-Core Departmental Technology Variety, 272 Analyzability, 272 Framework, 273 Department Design Workflow Interdependence Among Departments Types, 277
In Practice: Great Ormond Street Hospital for Children

272

275 277

279

Structural Priority, 280 Structural Implications, 280 In Practice: Athletic Teams Impact of Technology on Job Design Job Design, 282 * Sociotechnical Systems, 283 Design Essentials
Chapter 7 Workbook: Bistro Technology Case for Analysis: Acetate Department

321 323 325 327 328

281 282

285
287 288

Chapter 9: Organization Size, Life Cycle, and Decline

Purpose of This Chapter, 334 Organization Size: Is Bigger Better? Pressures for Growth, 334
B e e M a r k 9.0; Small Giants: Companies That Choose to Be Great Instead of Big

332
334

Chapter 8: Using IT for Coordination

and Control
Purpose of This Chapter, 296 Information Technology Evolution Information for Decision Making and Control 296 298

294

335

Dilemmas of Large Size, 336

How Do You Fit the Design? What Size Organization for You?

338

Contents

jii

Organizational Life Cycle Stages of Life Cycle Development, 340 In Practice: Amazon Organizational Characteristics during the Life Cycle, 344 Organizational Size, Bureaucracy, and Control
What Is Bureaucracy;', 346 In Practice: United Parcel Service (UPS)

340 343

Bureaucracy versus other Forms of Control Bureaucratic Control, 353 * Market Control, 354 Clan Control, 354 In Practice: Southwest Airlines Organizational Decline and Downsizing

352

355 356

345
347

Definition and Causes, 357 A Model

of Decline Stages, 358 In Practice: Herman Miller 359

Size and Structural Control, 348 Bureaucracy in a Changing World Organizing Temporary Systems, 350 In Practice: The Salvation Army Other Approaches to Busting Bureaucracy, 351 349 351

Downsizing Implementation, Design Essentials

360 362
363 364 365

Chapter 9 Workbook: Control Mechanisms Case for Analysis: Sunflower Incorporated Chapter 9 Workshop: Windsock Inc.

Part 5: Managing Dynamic Processes Chapter 10: Organizational Culture and Ethical Values
Purpose of This Chapter, 374 Organizational Culture What Is Culture?, 374 * Emergence and Purpose of Culture, 376
BookMark 10.0: Good to Great: Why Some Companies Make the Leap . . . And Others Don't 376

371
372
374 Corporate Culture and Ethics in a Global Environment Design Essentials
Chapter 10 Workbook: Shop til You Drop: Corporate Culture in the Retail World Case for Analysis: Implementing Change at National Industrial Products Case for Analysis: Does This Milkshake Taste Funny? Chapter 10 Workshop: The Power of Ethics

398 399
401 402 404 406

Interpreting Culture, 377 Organization Design and Culture The Adaptability Culture, 382 In Practice: Google The Mission Culture, 383 The Clan Culture, 384 The Bureaucratic Culture, 384
How Do You Fit the Design? Corporate Culture Preference

381 382

Chapter 11: Innovation and Change

Purpose of This Chapter, 411 The Strategic Role of Change Innovate or Perish, 412 Strategic Types of Change, 413

410
412

385

Elements for Successful Change Technology Change How Do You Fit the Design? Are You Innovative?

415 417 418

Culture Strength and Organizational Subcultures, 385 In Practice: Pitney Bowes Credit Corporation

386

Organizational Culture, Learning, and Performance 387 In Practice: Genentech 388 Ethical Values and Social Responsibility Sources of Individual Ethical Principles, 389 Managerial Ethics, 390 Corporate Social Responsibility, 392 Does It Pay to Be Good?, 392 How Leaders Shape Culture and Ethics Values-Based Leadership, 394 Formal Structure and Systems, 395 393 389

The Ambidextrous Approach, 418 Techniques for Encouraging Technology Change, 419
BookMark 11.0: Innovation: The Five Disciplines for Creating What Customers Want 422

New Products and Services New Product Success Rate, 423 Reasons for New Product Success, 424 Horizontal Coordination Model, 424 In Practice: Threadless Achieving Competitive Advantage: The Need for Speed, 427

423

426

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Contents

Strategy and Structure Change The Dual-Core Approach, 428 Organization Design for Implementing Management Change, 429
In Practice: Hewlett-Packard

428

Special Decision Circumstances High-Velocity Environments, 479 Decision Mistakes and Learning, 480 * Cognitive Biases, 481 * Overcoming Personal Biases, 482 Design Essentials
Chapter 12 Workbook: Decision Styles Case for Analysis: Cracking the Whip Case for Analysis: The Dilemma of Aliesha State College: Competence versus Need

478

430

Culture Change Forces for Culture Change, 431 Organization Development Culture Change Interventions, 432 Strategies for Implementing Change Leadership for Change, 434 In Practice: Memorial Hospital Barriers to Change, 435 Techniques for Implementation, 436 Design Essentials
Chapter 1 1 Workbook: Innovation Climate Case for Analysis: Shoe Corporation of Illinois Case for Analysis: Southern Discomfort

431

483
485 485 486

433 434

Chapter 13: Conflict, Power,

and Politics
Purpose of This Chapter, 492 Intergroup Conflict in Organizations Sources of Conflict, 493 In Practice: The Purpose-Driven Church Rational versus Political Model, 496 Power And Organizations Individual versus Organizational Power, 498 Power versus Authority, 498 Vertical Sources of Power, 499 The Power of Empowerment, 503 In Practice: Semco Horizontal Sources of Power, 504 In Practice: University of Illinois In Practice: Carilion Health System Political Processes in Organizations Definition, 510 When Is Political Activity Used?, 511 Using Power, Politics, and Collaboration How Do You Fit the Design? Political Skills Tactics for Increasing Power, 513 BookMark 13.0: Influence: Science and Practice Political Tactics for Using Power, 515 In Practice: World Bank

490
492 495 497

438
440 441 445

Chapter 12: Decision-Making Processes

Purpose of This Chapter, 452 Definitions Individual Decision Making Rational Approach, 454 In Practice: Saskatchewan Consulting Bounded Rationality Perspective, 457
How Do You Fit the Design? Making Important Decisions BookMark 12.; Blink: The Power of Thinking without Thinking

450
452 454 456

504 507 509 509

459 461

512 512 514 517 520

522 523 524

Organizational Decision Making Management Science Approach, 462

In Practice: United Airlines

461
463

Carnegie Model, 464 Incremental Decision Model, 466 In Practice: Gillette Company Organizational Decisions and Change Combining the Incremental Process and Carnegie Models, 470 Garbage Can Model, 470 In Practice: I V Huckabees Contingency Decision-Making Framework Problem Consensus, 475 Technical Knowledge about Solutions, 476 * Contingency Framework, 476 469 470

Tactics for Enhancing Collaboration, 517 Design Essentials

Chapter 13 Workbook: How Do You Handle Conflict? Case for Analysis: The Daily Tribune Case for Analysis: Pierre Dux

474 475

Integrative Cases
1.0 Rondell Data Corporation 2.0 It Isn't So Simple: Infrastructure Change at Royce Consulting 3.0 Custom Chip, Inc. 4.0 "Ramrod" Stockwell 5.0 W. L. Gore & Associates, Inc. Entering 1998 6.0 Dick Spencer 7.0 The Plaza Inn 531 539 544 551 554 569 574 8.0 Dowling Flexible Metals 9.0 The Donor Services Department 10.0 Empire Plastics 11.1 Littleton Manufacturing (A) 11.2 Littleton Manufacturing (B) 12.0 Hartland Memorial Hospital (A): An Inbox Exercise

529
578 582 586 589 601 603

Glossary Name Index

613 623

Corporate Name Index Subject Index

634 639